Hospitals Face New Scrutiny Over Price Transparency

Federal regulators are ramping up enforcement of healthcare price transparency requirements, with the Federal Trade Commission (FTC) warning hospitals against deceptive pricing practices as the Centers for Medicare & Medicaid Services (CMS) finalizes sweeping new rules designed to make healthcare pricing data easier to access, compare and verify.  

On Oct. 5, the FTC announced the agency had sent warning letters to 24 of the nation’s largest for-profit healthcare services companies, cautioning that hospitals cannot conceal the true cost of care or provide incomplete pricing information that limits consumers’ ability to comparison shop.

Because price is a material term, the letters state, clear and conspicuous disclosures are often needed.

Failing to disclose the price of a healthcare service may be deceptive if the omission is likely to mislead consumers acting reasonably under the circumstances. And when a disclosure is made, it may still be deceptive if it is incomplete, such as when it omits physician or facility fees or covers only a portion of the expected course of care. This is so because patients may reasonably believe they have been told the total cost of their care. Inaccurate disclosures are likewise misleading.

Insurers and employer-sponsored health plans currently publish monthly files detailing negotiated rates, out-of-network payments, and prescription drug prices. However, the data is often cluttered with “ghost rates” for services providers are unlikely to perform, such as a podiatrist delivering a baby. The new rules would reduce reporting to a quarterly schedule while simplifying the files and making pricing data more consistent and usable as reported in The Washington Post.

At the same time, CMS finalized updates to the Transparency in Coverage rule that governs insurer and health plan pricing disclosures. The agency said the changes are intended to address longstanding complaints that current pricing files are too large, difficult to navigate and often contain inaccurate or irrelevant information. The coordinated actions signal the Trump administration’s latest effort to strengthen price transparency across the healthcare system and increase scrutiny of hospitals, insurers and health plans that fail to provide accurate pricing information.

Among the most significant changes: insurers will be required to organize pricing data around provider networks, report negotiated rates primarily in dollars and cents, eliminate many so-called “ghost rates” for services providers would never perform, and certify that pricing information is complete and accurate. Plans also must identify a chief executive officer or senior executive responsible for overseeing the disclosures. 

 Inside Health Policy reported on the  HHS event announcing the final rule where CMS Administrator, Dr. Mehmet explained the intent of new changes,

We’re going to require plans and insurers to attest that what they publish is complete and accurate, because otherwise the system breaks down because people cannot trust the numbers.

According to federal officials, the reforms are expected to reduce pricing file sizes by roughly 70% while improving the usefulness of the data for employers, researchers and consumers. Reporting frequency for many files will also shift from monthly to quarterly. For hospitals and health systems, the actions increase both operational and compliance expectations. Regulators are signaling that transparency requirements are evolving from a reporting exercise into an enforcement priority. Hospitals could face greater scrutiny of their machine-readable files, consumer-facing estimates and compliance processes as federal agencies seek to ensure posted prices reflect actual negotiated rates.  

Employer groups welcomed the new executive attestation requirement, arguing it will improve accountability and confidence in pricing data. Consumer advocates, meanwhile, said the rule is a step forward but urged Congress to go further by requiring disclosure of actual negotiated rates in all circumstances and closing remaining transparency loopholes.